Credit card issuers watch online how you shop, customize offers

Online offers may vary depending on your domain, surfing habits

Many of the nation's top credit card companies are now using
high-tech marketing techniques that let them change their online offers on the fly, based on shoppers' surfing habits.

That means that you and a friend across town, who happen to have identical credit records, might see
different offers at the same card site at the same time. Although that might
seem odd, card companies say it's part of a strategy to offer deals
better suited to each individual.

Sometimes the discrepancies result from random test
marketing. But sometimes the offers are different because the websites are
tailoring information based on what they think they know about you.

Like other companies that do business on the Internet, card
issuers are trying to strike a balance between personalizing their sites and
protecting users' privacy. On one hand, they want to offer you products that
interest you. For instance, they'd like to pitch travel rewards cards to
frequent travelers. But at the same time, they say, they don't want to creep
people out by making pitches too personalized, even though technologies are
advancing that might help them make educated guesses about your income and
interests based on your Internet habits.

"Over the past 12 to 24 months, the infrastructure for tracking
on the Internet has gotten way, way more sophisticated," says Rob Shavell,
co-founder of Abine Inc., a Cambridge,
Mass., company that develops
privacy software.

Some tech companies, he says, now compile databases on
individuals' Internet histories, cross-reference that against other sets of
data, then use algorithms to predict what kind of products people might buy. The
instant someone visits a Web page, data about the visitor can be quickly
exchanged, and the host site could use the information to personalize offers.

At the request of CreditCards.com, Abine analyzed 10 of the
top U.S.
card issuers to see if their websites employed technologies that could be used
to acquire detailed information on visitors to those sites. Abine looked for
the presence of "cookies," bits of information a website puts on your computer
to remember you in future visits, as well as the use of what are known as
"third-party calls" -- or the exchange of information about you with an outside
website.

The results found that nine of the 10 card companies
exchanged information with at least one outside website, and all 10 placed
cookies on a visitor's computer. Discover exchanged information with the most
outside sites (11) and placed the most cookies (21).

Discover's experimentation
Anas Osman, Discover's vice president of new card member
acquisition, acknowledges that visitors to Discover's site might see different
card offers with different rates. Much of that, he says, springs from
randomized testing to determine what offers visitors find most appealing.

He says Discover has dabbled with using detailed information
compiled by outside companies about potential customers, but that it has
abandoned that approach. "We generally found that the data that was being
offered was not sufficient to make a good enough prediction" about what offers
customers like, he said.

Instead, Discover uses more limited data to tailor its website to you, such as what browser you use and where your computer is. For
instance, if you're using a computer from an .edu domain, you're more likely to
see a student credit card as the main offer on Discover's site, Osman says.

"Our goal is to make sure the website is as user-friendly
as possible," he says. Regardless of the main offer, all of Discover's offers
are available on its site.

As to why Discover employed the most cookies and checks with
outside websites, Osman says those are largely done to track users' activities
on Discover's site and to trace Discover ads users see on other sites.

Capital One, which Abine said had the second-highest number
of checks with outside Web pages, says it, too, is seeking to personalize the
experience, and that sometimes results in different lead
offers. Spokeswoman Pam Girardo says it's an extension of what card companies
have done over the years with direct mail: They don't send you a catalog but
rather an offer for a particular card based on available information.

"While we suggest products that we believe will be of interest
to our visitors, we do not limit their ability to easily explore all products
available on our site," she said in an e-mail.

She
says Capital One does not use data captured from other sites in targeting
offers.

Like
Discover, Capital One makes credit decisions based on traditional
methods -- application, credit check -- not on Internet data, she says. Both companies say
they do not use personally identifiable information for marketing and that they
comply with banking laws and their own privacy policies.

Same card, different rates
CreditCards.com first noticed differences in offer rates on
cards several months ago, when compiling information for its Weekly Rate Report. The report examines
rates on 100 of the most popular credit cards, and nearly every week,
researchers double-checking data noticed different rate offers on one or two cards. For instance,
researchers one day in mid-December found both a 13.24 percent and a 12.24
percent interest rate on the Chase Sapphire card, depending on who was looking
up the rates.

Chase,
which ranked No. 2 in Abine's study for placing cookies on visitors' computers,
declined to discuss the technology it uses. "Because we consider that
information to be proprietary, and for competitive reasons, I cannot share
details on this topic," spokeswoman Gail Hurdis said via e-mail.

Any data is going to be of value. The degree to
which it is of value is still being tested.

--
Julie Conroy McNelly
Aite Group analyst

Julie Conroy McNelley, senior risk and fraud analyst with
Aite Group, a research and advisory firm, says card companies are still in the
early stages of figuring out how technologies that were developed to fight
fraud might be used for marketing.

"Any data is going to be of value," she said. "The degree to
which it is of value is still being tested."

Device fingerprinting, link analysis
Two of the major technologies, she says, are device
fingerprinting, which gives companies information on the computer you're on,
and link analysis, which looks at correlations between you and other people.

"If companies start using it for marketing purposes, there
is the potential that people will view that as an invasion of privacy, and the
companies might start getting regulated," she says.

Shavell, the privacy software company's co-founder, says
there are two steps people can take to limit what companies know about their
habits.

First, opt of out targeted ad networks that link ads to your browsing
behavior. The biggest of these is at networkadvertising.org.

Second, he advises deleting your Internet history and
cookies through your browser.

Taking those steps will better safeguard your privacy,
though it's luck of the draw whether clearing your cache will save you some cash by yielding a better offer.

Be aware that if you delete your cookies, sites are less
likely to show you material that interests you, and you'll have to type
passwords in manually.

Says Discover's Osman: "You can use our site without
cookies, but it will be a less rich, less rewarding experience."

How credit card issuers gather, exchange data about you online

Card issuer

Number of outside websites contacted1

Number of cookies placed2

Discover

11

21

Capital One

9

9

American Express

7

3

HSBC

5

7

Citi

4

6

Bank of America

3

8

Barclaycard

1

1

Chase

1

14

Wells Fargo

1

6

U.S. Bank

0

4

1This is the number of third-party websites the card
issuer's main site contacts when you go to that page. That indicates the
company is exchanging information about you, which could be used to personalize
offers and track advertising.2This is the number of cookies, or bits of information for
future use, placed on your computer when you visit the site. Cookies help sites
understand your browsing history and also store passwords for convenience.

Source: Abine Inc. for CreditCards.com. Figures were gathered in early December.

Published: January 28, 2011

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